View Full Version : Healthy Capitalism - Why Globalism is Good for You

August 26th, 2003, 02:11 AM
Catching up

Aug 21st 2003

If you consider people, not countries, global inequality is falling rapidly

EARLIER this year, Stanley Fischer, formerly of the Massachusets Institute of Technology and the IMF, now a senior executive with Citigroup, delivered the prestigious Richard Ely lecture at the annual meetings of the American Economic Association. It was a privilege he would have preferred not to be granted, since he was standing in for his old friend, Rudiger Dornbusch, who died last year. Nonetheless he used the occasion to memorable effect, delivering a fine tribute to Dornbusch and then an overview and defence of globalisation that Dornbusch himself, an economic internationalist if ever there was one, would have been proud of. The lecture has now been published*.

The whole essay deserves to be read carefully by globalists and anti-globalists alike. But packed in alongside lots of other good stuff is a pair of charts that deserves an even wider circulation. Admittedly, the diagrams are complicated at first sight—but they are worth the effort. Once one has understood them the answers to some of the most important questions about globalisation are clearer.


Begin with the top chart. Each point represents a country. The vertical axis shows average annual growth of income per head between 1980 and 2000; the horizontal axis shows the level of income per head in 1980. Note in passing that the countries of sub-Saharan Africa are distinguished from the others: they are clustered in the lower left-hand corner of the diagram, representing both very low incomes and very slow growth.

In the last 20 years of the 20th century, globalisation, however you measure it, was advancing rapidly. Globalisation, according to its advocates, helps poor countries to catch up. So what one would wish this chart to show is a marked downward-sloping pattern of points: saying, in effect, the poorer any given country, the faster its growth. The chart shows no such pattern. In fact, a line of best fit through the scatter of points (as shown) slopes slightly upwards, implying that, on average, the rich are getting richer faster than the poor are getting richer.

The Institute for International Economics posts speeches and lectures by Stanley Fischer, including “Globalisation and its Challenges”. See also AEAweb and the American Economic Association.

In the bottom chart, the axes and the countries plotted are the same as before, but the points are now drawn as circles whose areas are proportional to the population of the countries concerned. Whereas the first chart gave a sense of how the poorest countries in the world are doing in relation to the richest, the second chart shows how the people living in the poorest countries are doing in relation to the people living in the richest. Switching the focus to people transforms one's impression of the figures, for now one sees a strongly downward-sloping pattern. The poor, on average, are catching up. And the main reason is that two of the poorest countries in the world—China and India—have both (a) enormous populations and (b) rapid growth in incomes per head in the years in question.

Encouraging as that may be, an anti-globalist would draw attention to the very large number of people (as well as countries) who suffered not merely from slow growth but from negative growth—falling incomes per head—in the 1980s and 1990s. This is true, but is it just a coincidence that India and China, both of them rapid globalisers, did so well, whereas the countries of sub-Saharan Africa (in particular) combined severely limited economic integration with dismal economic performance? Bearing this in mind, the more closely one looks at the charts, the stronger the case for globalisation seems. The real question—at least so far as reducing global poverty is concerned—is not whether globalisation is a good thing, but why some countries (and in Africa's case an entire region) find it so difficult to participate. The answers, as Mr Fischer relates, are complicated. Rich- and poor-country governments alike are partly to blame.

America and the European Union both maintain trade restrictions that hurt the developing countries. They have been promising reform for years, but the world is still waiting. Mr Fischer calls for “significant increases” in aid, though he acknowledges that aid will need to be more selective if its patchy record of success to date is ever going to be improved.

But governments of the poorest countries themselves bear much of the responsibility. Many of the world's highest trade barriers are those imposed by poor-country governments on trade with other poor countries—to say nothing of the failure to provide security or stability, or of the enormous sums (including money received as aid) squandered on vanity public projects or luxuries for the ruling circles and their chums. For countries with governments like this, globalisation is always going to be difficult to achieve. Nonetheless, it cannot hurt to understand that the problem is not too much globalisation, but too little. If you ever need reminding of this, look at Mr Fischer's charts.

* “Globalisation and Its Challenges”. By Stanley Fischer. AEA Papers and Proceedings. American Economic Review, volume 93, number 2, May 2003.

Copyright © The Economist Newspaper Limited 2003
the economist (www.economist.com)

(Edited by chris at 2:15 am on Aug. 26, 2003)

August 26th, 2003, 02:19 AM
Reason Magazine
Free Minds & Free Markets

August-September 2003

Really Creative Destruction
Economist Tyler Cowen argues for the cultural benefits of globalization
Interviewed by Nick Gillespie

What are we to make of the fact that Saddam Hussein selected Frank Sinatra’s version of "My Way" as the theme song for his 54th birthday?

Cultural pessimists and critics of globalization would tend to view such a curious choice with alarm or condescension, as just one more case of tawdry American, profit-based pop supplanting "authentic" indigenous music. On the left, political scientist Benjamin Barber decries the spread of "McWorld," a "bloodless economics of profit" that relentlessly exports cheesy American goods to far-flung lands. On the right, conservatives such as philosopher John Gray fret that free trade is destroying local customs while homogenizing culture and lowering standards.

In his recent and important book Creative Destruction: How Globalization Is Changing the World’s Cultures (Princeton University Press), economist Tyler Cowen argues that something very different -- and much more heartening -- is going on. He takes his cue from Joseph Schumpeter, who famously described the "perennial gale of creative destruction" at the very heart of market orders. Cowen contends that "cross-cultural exchange...creates a plethora of innovative and high-quality creations in many different genres, styles, and media," and that such exchange "expands the menu of choice, at least provided that trade and markets are allowed to flourish."

The result is a powerful, richly evocative contribution to our understanding of how art and commerce, often seen as natural enemies, are in fact closely related. Cowen, described by The Boston Globe as "the leading proponent of a free market position within the arts and culture," writes: "A typical American yuppie drinks French wine, listens to Beethoven on a Japanese audio system, uses the Internet to buy Persian textiles from a dealer in London, watches Hollywood movies funded by foreign capital and filmed by European directors, and vacations in Bali; an upper-middle-class Japanese may do much the same. A teenager in Bangkok may see Hollywood movies starring Arnold Schwarzenegger (an Austrian), study Japanese, and listen to new pop music from Hong Kong and China, in addition to the Latino singer Ricky Martin."

Given the anxieties surrounding globalization -- and in the wake of the 9/11 attacks, which many took to reflect an unbridgeable gap between Islam and the West -- the deep understanding Cowen brings to cross-cultural exchange has never been more relevant.

Cowen, 41, has explored related territory in two highly acclaimed books, In Praise of Commercial Culture (1998) and What Price Fame? (2000). Cowen was raised in New Jersey, and his interest in commerce may stem from the fact that his father was the president of the Northern New Jersey Chamber of Commerce. After attending Virginia’s George Mason University, he took his Ph.D. from Harvard University in 1987.

Following a teaching gig at the University of California at Irvine, he returned to George Mason, where he holds the Holbert C. Harris Chair of Economics and directs both the James M. Buchanan Center for Political Economy and the Mercatus Center. He is also the proprietor of a lively Web home page that hosts an extensive and ever-expanding ethnic dining guide for the Washington, D.C. area. More recently -- and in keeping with his interest in cross-cultural trade -- Cowen married the Russian-born lawyer Natasha Chernyak.

Editor-in-Chief Nick Gillespie interviewed Cowen in April.

reason: Give an example that characterizes the sort of cultural exchange and hybridization that you discuss in Creative Destruction.

Tyler Cowen: The first point to make is that all examples characterize it. The only question is, how much of it do we already see? Look at a book and ask yourself, where does paper come from, where does printing come from, where do the ideas in the book come from? What’s the religious background of the author? You’re already talking about the Middle East, China, Europe, the United States.

Just about anything you can find reflects a synthetic culture based on trade. It’s really not even a question of degree. Virtually everything is a product of multiple cultures coming from very different places, and we should be acutely aware of that when we approach debates on globalization and nationalism and cultural protectionism.

Reggae music is a specific example. It drew heavily from American rhythm and blues. It really took off when Jamaicans received American radio broadcasts of American music. Later, it drew heavily from the Beatles and the British Invasion bands. It’s a notion of music that’s seen as intensely Jamaican, and in a way it is, but it’s also drawing on sea chanteys and influences from all over the place. And it’s drawing on a religion -- Rastafarianism -- that has a link to Ethiopia.

Not only is reggae incredibly synthetic, but it’s had an enormous influence on global culture. A lot of American rap music came from reggae. Musicians such as Blondie, Paul McCartney, Paul Simon, and many others have been considerably influenced by reggae. A lot of techno and rave music comes from the Jamaican form called dub.

Here’s a pretty small island, not too many people, not too rich, very close to this big cultural giant, the United States, and it develops a form which is synthetic in the first place and then really has a big impact on the world. It’s not the case that it’s been trampled by big conglomerate multinationals. Jamaica has more record labels than the United Kingdom.

reason: If this sort of hybridization is so striking and central to cultural production and exchange, why isn’t it more widely acknowledged, much less celebrated?

Cowen: I think a lot of it is pride. People want to take pride in either a country, an ethnic background, or a place of origin. In order to construct an identity, a story, a sense of pride, you need tales about how your group, your region, your nationality -- your whatever -- is somehow special, different, apart, and imbued with a particular kind of meaning.

I think these stories are actually quite useful. Such beliefs motivate people; they give people comfort. I don’t wish to strip them away from people. But if we take those stories too literally and start basing policy on them and forget about this other truth, then we’re in deep trouble. We’ll start thinking that the nation or the group is special and that you need to protect the group.


eason: Even as you celebrate the benefits of trade and mixing, you write about the "tragedy of cultural loss." What do you mean by that?

Cowen: The day of very small cultures -- of groups of 10,000 or 20,000 people that have their own language and formerly had little contact with "civilization" -- is coming to an end. I’m thinking of groups such as the Pygmies and certain indigenous groups in Mexico. The end won’t come tomorrow, or in 10 years, but groups like that are finding it harder to maintain their isolation. Instead, we have very creative regions or polities, but they tend to be like India, Brazil, or the United States: They’re large and complex and varied, but no single part of it lives much in isolation. That is not a less creative outcome. In many ways, it’s more creative, and the isolated people now have access to the treasures of the world.

As the world becomes more integrated, we lose a lot of dysentery and diarrhea and malaria and women dying in childbirth who don’t have to. There’s a whole list of benefits that we’re all familiar with, and those to me are most important. But in terms of culture, there is a loss. For instance, it’s absolutely true that a lot of languages are dying. There’s a gain because you bring people into a broader language network where they can write for others and they can read things by others. I don’t have a problem with that trade-off, but I don’t want to deny that something is lost. These vanishing languages are rich, and they’re interesting. There’s a net gain, but you can’t just paint a picture of an advance along all fronts. It’s not the reality.

reason: One of the problems with arguments about cultural loss is that they are often advanced for protectionist reasons. So, for instance, we have the French decrying U.S. cultural imperialism and insisting on domestic-content rules and the like. What are the effects of trying to hold back cultural creative destruction?

Cowen: The good news is that it cannot easily be held back. Maybe you can if you go to extremes, like Xhosa did in Albania. But short of that, it doesn’t work. Look at the French. For all the noise they make, Paris is remarkably open to African and Middle Eastern cultures -- and to Hollywood movies, for that matter. They have these quotas, but they don’t enforce them. If you want to see a movie in Paris, you’re in great shape, no matter what kind of movie you want to see.

In that way I’m quite optimistic. I don’t feel we’re in any great danger of this mixing being overturned by a few tariffs or by a few intellectuals who hate capitalism. I think the forces in favor of trading cultural ideas are so strong you simply can’t hold them back short of extremes that few countries today are even thinking about.

As a whole, the world has been moving towards freer trade for quite a while. Since the 1930s or so, the picture looks pretty good. It’s far from perfect, but it’s pretty good.

reason: Creative Destruction generated a lot of reviews, including two by a couple of intellectual heavyweights: the anthropologist Clifford Geertz (in The New Republic) and the political scientist Benjamin Barber (in the Los Angeles Times). Geertz criticized you for not making personal aesthetic judgments about good and bad art. What do you think of that?

Cowen: You know, the book itself states very clearly that my purpose is not to say: "Here are the tastes of Tyler Cowen; you have to agree with them. Judge the world by these standards!"

The book makes an argument that people’s ability to develop "good" taste -- which I may or may not agree with -- is far greater now than it ever has been in the past. People who pursue hobbies, who are well-informed, they know the difference between, say, good Zairian music and bad Zairian music. The key thing that markets do is economize on the need for agreement.

I think Geertz is still operating in a framework where you’re supposed to put down your list, like the literary critic Harold Bloom did in The Western Canon, which really should have been titled Harold Bloom’s Canon. Geertz thinks you should lay everything on the line with your aesthetic judgment. But you’re never going to get people to agree with those judgments, even if they’re objective in some ultimate sense. I’m more interested in a broader argument: that markets and exchange will offer people of many different tastes many different things. I think

global culture does that. It economizes on the need for agreement.

reason: Isn’t this one of the things about markets -- whether in culture or more conventional goods -- that has always bothered intellectuals? By economizing on the need for agreement, you’re economizing on the need for consensus and the need for gatekeepers and tastemakers, roles intellectuals have traditionally filled. They don’t occupy the same position as they might in a more centralized, hierarchical system.

Cowen: That’s right. You hear people say, "Oh, in the old Soviet Union or Czechoslovakia, intellectuals and artists were so important." Often they were. People would sort of hang onto the next work from a critic or a poet. But when you have a freer, wealthier, more stable society, they’re not important in the same way. You know, maybe something is lost there, but in net terms I have no doubt it’s for the better.

There’s another reason why intellectuals are so often hostile to markets. At least part of it is because markets do not reward quality per se, and that is resented. In a cultural context, if you look at how rewards are distributed, they’re not linked directly to quality, no matter how you care to define it. You look out in the market and see that Michael Jackson, who maybe is not the best father, earned however many millions from his music. Or that Madonna, who’s not the best singer, earned so much more than a great opera singer. We instinctively feel there’s something wrong with that. Maybe there is something wrong with that at some moral level, but the more important question is whether the system as a whole delivers the cultural goods. Does a system that allows a bad singer to earn more than a good singer get you more singing of many different kinds? The answer is yes.

reason: One of Benjamin Barber’s main criticisms was that your analysis is ultimately unconvincing because you don’t account for the power relations of intersecting cultures.

He wrote: "One McDonald’s in Tiananmen Square may enhance diversity in China, just as the first Starbucks in Berlin diversifies its cuisine. But the market corporations of McWorld aspire not just to penetrate but also to permeate markets, and their ultimate objective is monopoly. The tenth McDonald’s is a different story than the first, and No. 100 begins to force out the competition. When the franchises break the 1,000 mark, homogenization is more salient than diversification. Pluralism is not only diminished within a given culture...it is diminished among cultures as well." How do you respond to that?

Cowen: First, I should say that I thought overall his review was pretty generous, especially for someone whom I specifically criticized. But I disagree with him. What does he mean by power? My view is not that forcible conquest didn’t happen or that it was a good thing when it did happen. I simply say at the beginning, I’m not here to defend that. Then there’s the question of if you’re a multinational corporation, how much power do you have over people or customers in other countries? The answer is very little.

Look at American television programs. We’ve been trying to send those abroad for years, and they’ve really been decisively rejected by virtually all foreign audiences. Some things are picked up and others not. Simply being a big multinational or spending a lot on advertising really doesn’t do the trick. A lot of these so-called attempts at cultural imperialism are failures, and a lot of companies have lost a lot of money when customers don’t want the product.

Take the example of McDonald’s in Tiananmen Square and China. There’s a lot more McDonald’s in Hong Kong than anywhere else in China -- and Hong Kong is also where dining is best for Chinese food. The same process that gives you a lot of McDonald’s also gives you better Chinese food and better French food, Italian food, Indian food, whatever else you want to eat. I think there’s room for plenty of McDonald’s in China.

reason: A related fear that many people have about commerce mixing with culture has to do with concentrated ownership of entertainment and media companies. You’ll hear, for instance, that five or six companies own virtually all entertainment that’s produced in North America or sold in the Western world. Are you worried about that sort of thing?

Cowen: There is more and more choice. Look at what you can get through the Internet. The Internet allows you to bypass all of these conglomerates and order things directly -- and find out about them in the first place. What the conglomerates are good at is marketing and distribution. So if good things are done, conglomerates often, though not always, pick them up, and they’ll try to sell them to you more cheaply. But we’re not in their thrall. We buy things outside of them all of the time. Look at the way the conglomerates have played the music market. They turned down rap, they turned down heavy metal, they wouldn’t pick up Motown.

There are many, many examples of how they turned down new trends, which then succeeded outside of them. They later picked up popular forms, but they didn’t stop them from happening in the first place. Rock ’n’ roll itself came through the independent record companies.

reason: How does your interest in cultural exchange intersect with post-9/11 interest in and anxiety over anti-Western Islamic culture?

Cowen: I’m very interested in it. I’m doing a lot of work reading about it and thinking about it. Islam is incredibly diverse. And in its essence, it’s not necessarily opposed to the things that you and I might favor. A big problem is that people in the United States and, to a lesser extent, Europe, don’t appreciate the cultural contributions of Islamic societies, and they tend to look down on them. I think we’d have more influence and leverage in the Islamic world if we would ourselves be open to what they have to offer, rather than just thinking, "How can we get our point of view across to them?"

reason: What are some of the cultural contributions of Islamic societies that you think are particularly striking?

Cowen: Their popular music is one of the most vital in the world today, especially Algerian-based music that is now made frequently in Paris or in Belgium. Koranic recitals are very beautiful. A lot of older and contemporary visual artists are very good. It’s not that I want to force someone to agree with my tastes, but there’s a lot there, and it’s a kind of crime that we pay so little attention to it. I think one reason why we’re dismissed by them is we dismiss them. I think we should listen to rai music more, for instance. I think it would be a better world if we were more open to what they have to offer. They’re not idiots, and they see that we’re not open to their culture. I’m not saying it’s some kind of excuse for terrorism, of course. I’m just saying that we find it very hard to reach the honest middle in Islamic countries, and that’s part of the reason why.

reason: What’s your next project?

Cowen: I’ve written a case study of globalization in one Mexican village, a village I mention briefly in Creative Destruction. It’s an anthropological case study of three brothers. I really did most of the research at the same time I was working on this book, so you could think of them as the same book.

I found that cross-cultural trade between Mexico and the United States is extremely beneficial. It’s not without costs, but it really has done a lot to help Mexico develop its Mexican culture. It also lets people in the U.S. buy artwork more cheaply than they otherwise could have, exposes them to new styles, and lets them have interesting experiences.

reason: As trade between Mexico and the U.S. gets tighter, there also seems to be

increasing anxiety about immigration.

Cowen: There are some are real issues. Personally, I would favor the United States’ taking in many more people than it does now, but at the micro level, there are very serious problems. I think of the U.S. law that says a hospital has to treat anyone who shows up on its doorstep. You combine that with more immigration, legal or not, and you can see there’s a problem. A lot of hospitals near the Mexican border are almost bankrupt because they can’t handle the flow.

reason: What’s the fix for that kind of thing?

Cowen: I’m not sure I have a fix for all the micro problems. I focus more on the macro gains, the larger picture. The micro problems probably need micro fixes, which I’m not able to supply. And I do favor more immigration. But, you know, there is a problematic element to it. The Julian Simon point that the gains are much larger than the costs is certainly true, but it’s not always a help to the people in the field. Still, I think we need to keep focused on the enormity of those gains from trade in terms of people and culture.

Copyright © 2003 Reason Foundation
Reason Online (www.reason.com)

TLOZ Link5
August 26th, 2003, 11:23 PM
I agree that there's nothing wrong with globalization or capitalism, but the important thing should be that trade agreements are fair and not biased towards wealthier countries. *Why should coffee growers in West Africa be paid less than a dollar for each pound of coffee they ship when their harvests are sold for ten times as much in stores in Western cities? *Why do Western nations tell governments in the Third World not to subsidize their own farmers when it's the policy of Western nations to subsidize their agricultural industries—and then to flood Third World markets with their produce?

It's not just the United States, mind you; in proportion to some other offenders, the U.S. is relatively tame. *I'm definitely not singling any other countries out, but I'm just making a point with this example (sorry, Fabb)—France, for all its rhetoric on making trade fair, has shipped huge amounts of its own milk to the Caribbean at the expense of local dairy industries.

There are plenty of interesting Websites out there detailing the situation, but here's one that I particularly like:


It's very informative and in-depth.

I'll get off my soapbox now.

(Edited by TLOZ Link5 at 2:20 pm on Aug. 27, 2003)

Freedom Tower
August 27th, 2003, 11:46 AM
I don't know much about this particular topic. What I do know however, is that the US donates a huge amount of aid to poor countries every year. And then many people think somehow we are to blame for their poverty, it's ridiculous. For example, I know we gave either Uruguay or Paraguay(I forget which) 2 billion dollars in aid a while back. When they tried to pay us back many years later we refused and told them to keep the money. Meanwhile, our national debt continues to soar... I think that we have to start counting what we are giving away to Africa, etc. I'm sure we have given back far more than we have taken, yet it isn't recorded and our nat. debt. goes up higher and higher.

TLOZ Link5
August 27th, 2003, 02:23 PM
The argument is that food aid creates competition with poor local farmers who cultivate the same produce. *Our intentions may be good, but in many cases we are effectively edging out the local agricultural industries.

August 27th, 2003, 02:34 PM
Once again...

The road to hell is paved with good intentions.

Freedom Tower
August 27th, 2003, 06:16 PM
You see TLOZ, it hurts both of us. We give stuff away to foreign countries for free, while there are starving people here that can benefit. So while people here starve the Africans are getting handouts. Which is another harm of this. This is why George Washington wanted us to be isolationist. ;)

Freedom Tower
August 27th, 2003, 06:18 PM
Also, the question I forgot to ask is: Even if we didn't give handouts, could the Africans afford to buy from local farmers? Probably not, so I would say the African farmers are in trouble from the start. However, anyone who could afford food in africa will feel jipped and want to get handouts as well.

August 27th, 2003, 07:30 PM
I am not an economist, but I can imagine a significant influx of agricultural goods into an economy would effectively cause a devaluation of the local currency.

Typically these food subsidies are resold (illegally) at prices far lower than the cost of domestic production of the same goods. *As TLOZ stated, this is a disincentive for local farmers to produce these goods. *

An analagous situation would be someone who lives in a below market apartment and recieves more money than they are worth. *If reality ever kicked in, this poor soul would be in serious trouble, just as our nation's humble beneficiaries will, should we ever leave them high and dry.

It's a curious predicament indeed. *Either we must continue to help, and by default demean and disenfranchise these populations, or be guilty of turning our backs on them.

I would have vehemently opposed the initial policy to give this type of aid, but now that it's in motion I think this situation must run its course. *By this I mean that it is up to us to find a mutually beneficial longterm synergy, wherin these peoples can be empowered and work their way out of the debt they will inevitably find themselves in. *

Is this the new global capitalism? *I hope not.

February 26th, 2012, 05:28 PM
God's Capitalism (they leave out the part of the Bible that allows for ownership of other human beings) ...